Press Release
January 27, 2009

To position RP as a safe haven of investments amid Global Financial Crisis
NOW IS THE MOST PROPITIOUS TIME TO ESTABLISH RP'S REAL ESTATE INVESTMENT TRUST FRAMEWORK -- ANGARA

Senator Edgardo J. Angara said today that the enactment of the Real Estate Investment Trust (REIT) law will boosts RP's position as a safe haven of investments in the Asia-Pacific region amid the Global Credit Crunch.

"Our stock market is considered one of the oldest in Asia; but its inferiority in size is a matter of national embarrassment. Its small size explains in part why it can be quite challenging for many Filipino workers to get a job and for many small companies to expand its business. In other words, the slow development of our stock market mirrors the slow economic development of our country," said Angara who chairs the Senate Committee on Finance.

Among the five exchanges in the original ASEAN, for instance, RP's stock market has the smallest value turnover with only US$17 billion, the smallest market capitalization, and the fewest number of listed companies.

He added, "If we fail to introduce REIT into our country, we might find our stock market further lagging behind our neighbors. Its obvious to see that in the catch-up game we are engaged in, the markets that we are trying to catch-up with are also moving and continuing to develop. The REIT bill includes measures to ensure that we not only move towards the direction our neighbors are moving, but we must also start proceeding at a much faster pace."

REIT provides a tax effective legal structure allowing the public to invest in income generating real estate assets and eventually derive a return from it. Angara also said that establishing REIT in the country would provide liquidity to the real estate market, unlock capital and eventually help the Philippine economy.

Angara, in his sponsorship speech for the REIT bill, highlighted how small and large investors will enjoy advantages from investing in REITs.

First, there is a common trend in markets with successful REIT models: REITs receive tax incentives from the government, but are required to pay out a substantial part of their distributable income by way of dividends to shareholders, in addition to other requirements to ensure investor protection.

Second, these companies provide investors with the opportunity to participate directly in the ownership and financing of large-scale real estate projects at affordable rates of investment.

Thus, investors can make the investments in the REIT without being burdened by the disadvantages of illiquidity, high transaction and management costs that are associated with traditional private real estate ownership.

Third, investors also enjoy the assurance of a fair, transparent and efficient market for buying and selling the REIT securities, because the REIT law will require the listing of the REIT stocks in the local stock exchange. Therefore, it is easier to buy or sell the REIT shares than to directly buy and sell real properties.

Fourth, investment risks are minimized, because the REIT assets are managed professionally by an independent fund manager and property manager.

Finally, cross-border investments in REITs will also encourage strategic foreign investments in the Philippine capital market.

The REIT measure provides that REITs must be stock corporations established in accordance with the Corporation Code of the Philippines, with a minimum paid-up capital of one hundred million pesos (Php100,000,000.00) at the time of its registration.

A REIT must be a listed public company, meaning, it must be listed in an exchange; and to be considered as such, the REIT must, upon and after listing,

1. have at least one thousand (1,000) shareholders each owning one hundred (100) shares of a class of shares who in the aggregate own at least thirty percent (30%) of the outstanding capital stock, and

2. must not be considered a closely-held corporation under section 127(b) of the National Internal Revenue Code of 1997.

The Angara-led Senate Committee on Banks, Financial Institutions and Currencies has already submitted Committee Report No. 103 on the REIT bill last September 24, 2008 and is now set for plenary discussion.

"In the context of the Philippine Real Estate market, which has experienced a roller coaster ride in the past years, I think that uneven edges will be smoothed out if we've got an active REIT industry. The time to act is now -- and we need to act quickly," added Angara.

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